China Inc. Moves Factory Floor to Africa

By Peter Wonacott
May 14, 2014 4:41 p.m. ET

CAPE TOWN, South Africa—Each sparkly green television motherboard that rolls off the Hisense Co. factory line here moves China a tiny step toward a new global manufacturing base.

The line’s eight South African technicians monitor the assembly process by computer and have incentives to work quickly. In less than a year of operation, they are producing at the same clip of 70 seconds per board as their Chinese counterparts.

But there’s a hitch: Hisense factories in China use half as many workers to make the same product. In South Africa, one technician monitors one machine. In China, the company’s technicians monitor two machines apiece.

“Step-by-step,” says Jerry Liu, general manager for the Middle East and Africa unit of the home-appliance maker. “We’ll get there.”

Faced with rising labor costs at home and negative perceptions about their employment practices in Africa, Chinese companies are setting up new factories on the continent and hiring more Africans. The companies efforts will test whether the masters of low-cost manufacturing can be as productive in Africa as they are in China.

(Read More: http://online.wsj.com/news/articles/SB10001424052702304788404579519631654112594)

How Target Missed The Mark in Canada

By Shelly Banjo And Rita Trichur
Updated May 8, 2014 6:43 a.m. ET

Nadia Yee grew up driving from Ontario to Detroit to shop at Target. But when the chain finally opened up in Canada, she was deflated.

The new Toronto store was understocked, and the selection of the items from pajamas to jewelry was limited. Her experience wasn’t isolated. Canadians who camped out the first night to shop at Target drifted away after being disappointed by high prices, uninspiring products and bare shelves.

“You’d go sometimes and the racks would be empty,” said the mother of two who works for a drug company. “I’ve been a little bit disappointed.”

That, in a nutshell, is how Target Corp.’s first international expansion turned into a first-year flop. The discount chain had told investors that its Canadian business would be profitable by the end of 2013.

Instead, losses are expected to reach $2 billion by the end of this year, according to Tiburon Research.

The botched entry into a market that was hungry for Target’s products and where rival Wal-Mart Stores Inc. is expanding contributed to the company’s decision to part ways with Chief Executive Gregg Steinhafel and presents a major challenge for the new management team, headed by interim CEO John Mulligan.

In an interview on Tuesday, Mr. Mulligan said the company is committed to staying in Canada and needs to get to its goal of generating $6 billion in annual sales north of the border by 2017.

(Read More:http://online.wsj.com/news/articles/SB20001424052702304655304579548321031549910)

Unloved in U.S., Dirty Coal Makes Its Way to Europe

By John W. Miller
Updated May 6, 2014 7:57 p.m. ET

DRAX, England—Even as it faces increased regulatory scrutiny at home, America’s dirty and unwanted coal is being embraced in one of the world’s cleanest energy markets: the European Union.

At the biggest power plant in the U.K., operated by Drax Group PLC, a small black mountain of a million tons of coal sits at the base of a dozen 374-foot cooling towers.

Much of it is high-sulfur coal from under the plains of Illinois and Indiana—exactly the kind of high-emission, power-plant fuel receiving closer scrutiny from U.S. regulators and courts. Last week, the Supreme Court ruled in favor of enforcing regulations that require power plants in 28 states to cut coal emissions that blow across state lines.

Many U.S. power plants were already reducing emissions in anticipation of tougher Environmental Protection Agency rules that take effect in 2015. Now, the Supreme Court ruling could affect 1,000 power plants in the eastern U.S. that might need to install additional pollution controls or cut back on coal consumption.

These are tough times for the global coal industry, which has been battered in recent years by regulations, the U.S. boom in extracting gas from shale-rock formations, and lower prices caused by softening demand from China. Coal now generates about 39% of electric power in the U.S., off from 55% in 1990.

Low domestic demand has renewed the focus on U.S. exports, which are on track for a record-setting third straight year of more than 100 million tons. The 28-nation EU imported 47.2 million tons of U.S. coal last year, up from 13.6 million tons in 2003. Exports to the U.K. alone are up tenfold in the same period. The U.S. ranked second only to Russia in supplying Europe with coal last year.

Germany’s decision to phase out of nuclear power after the 2011 Fukushima nuclear disaster in Japan has also made it a significant buyer of U.S. coal, mostly because the commodity is so inexpensive.

“Before the financial crisis, Europe was happy to favor the environment, but when the economy started not doing well, they weren’t quite ready to accept the high power price,” so energy consumers returned to coal, says Daniel Rohr, an analyst for Morningstar Inc.

Since 2003, German imports of U.S. coal have risen to more than 15 million tons from under a million tons. A spokesman for E.ON EOAN.XE +2.05% SE, Germany’s largest power and natural-gas utility, says it now purchases more than four million tons of coal a year, or 17% of its total, from the U.S., up from 800,000 tons in 2010. E.ON operates power plants in several European countries.

(Read More:http://online.wsj.com/news/articles/SB30001424052702303417104579543814192542586?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB30001424052702303417104579543814192542586.html)

Lack of Opportunity Frustrates South African Voters

By Devon Maylie
April 23, 2014 8:11 p.m. ET

RUSTENBURG, South Africa—The country’s ruling African National Congress is expected to win national elections in May, but public frustration is growing over widening income disparity and the government’s perceived inability to address the issue.

The victors will preside over an increasingly fragile political and economic landscape, especially here in South Africa’s platinum heartland, where strikes have dearly cost the world’s biggest producer of the metal.

Talks to end the latest strike, which is in its third month, are set to resume Thursday. Mining companies say they have taken a loss of more than $1.4 billion in revenue and that workers have lost $500 million in salaries.

President Jacob Zuma and his party are facing public anger that has swelled since the March disclosure of the $23 million upgrade to his private home, a cost seven times higher than Nelson Mandela’s security upgrade, and far more than previous presidents.

(Read More:http://online.wsj.com/news/articles/SB10001424052702303949704579461631978756864)

Inside Nike’s Struggle to Balance Cost and Worker Safety in Bangladesh

By Shelly Banjo

April 21, 2014 10:38 p.m. ET

DHAKA, Bangladesh— Hannah Jones, Nike Inc. NKE +1.23% ‘s head of sustainable business, had been lecturing colleagues for years about the dangers of manufacturing in Bangladesh. Yes, the country featured some of the cheapest factories in the world, she argued, but the athletic-gear maker could ill afford another public pasting over its labor practices.

Her counterparts in the production division, charged with squeezing costs, countered that they should all visit the place together and then decide. So one day last year, five of them slogged up a dirty staircase to the top floors of an eight-story building here that housed one of Nike’s suppliers, Lyric Industries.

Rolls of fabric were strewn across the production floor and some windows were bolted shut, Ms. Jones recalls, clear-cut hazards in the event of a fire. The building was filled with other businesses, and there was no telling how safe those were. After spending the morning speaking with Lyric managers, workers and people in the neighborhood, they flew home and decided to cut ties with the company.

The decision came not long before another garment-manufacturing hub known as Rana Plaza collapsed, killing 1,100 people in a suburb of Dhaka, in the worst industrial disaster in Bangladesh’s history. The tragedy, which happened a year ago this month, has forced Western apparel sellers to re-examine their world-wide search for cheap labor, which has turned Bangladesh into an exporter of $20 billion of clothing a year.

“Our competitors were moving fast into Bangladesh and the pressure was getting bigger and bigger,” says Nike Chief Operating Officer Eric Sprunk. “We needed a strong point of view to say, ‘Are we going to increase our source base there or not?’ “

(Read More:http://online.wsj.com/news/interactive/Nike?ref=SB10001424052702303873604579493502231397942)

As the EU Expands, Bloc Confronts Its Roma Problem

By Naftali Bendavid

Updated April 23, 2014 6:44 p.m. ET

Eforie, Romania

Three bulldozers, backed by teams of police, arrived at dawn to demolish 20 houses belonging to this town’s Roma, or Gypsies, leaving them to pick through debris for their belongings and brave several days of storms.

“Is this a jungle? Are we animals? Where do they want us to live?” said Bairam Memet, a 41-year-old resident in a gray hat and black jacket.

Eforie city officials say the 105 Roma in the now-razed enclave—some of whom had lived for decades in concrete houses—were terrorizing the area by piling up garbage and stealing. Many neighbors dispute the terror charge, but some support the eviction nonetheless, saying the Roma spread trash and committed petty crimes.

“In my opinion, they shouldn’t live separately but integrated into the community,” said Ioan Albescu, 55, who lives nearby. “It’s like dogs—if they are in a pack, they will bite you, but not if they are separate. When there are a lot of Roma together, they can be aggressive.”

The Eforie demolition and dozens of such events around Europe show the emotional resistance facing the European Union as it struggles to help the Roma, the continent’s biggest minority with 11 million people.

The EU is working to overcome centuries of discrimination that have kept the Roma disproportionately uneducated, jobless and poor, culminating in World War II when the Nazis sought to exterminate them. One-third of Roma are unemployed, 20% have no health insurance and 80% live below the poverty line, according to the EU Fundamental Rights Agency.

Now, a decade after countries with large Roma populations started joining the EU, the bloc is aiming to raise that standard of living. The new focus comes with the end in January of travel restrictions on Romania and Bulgaria, both with big Roma populations, which joined the EU in 2007. The opening of borders had prompted fears in older EU countries of a Roma “invasion”—so far largely unfounded—of poor immigrants that could tax welfare systems and public order.

(Read More:http://online.wsj.com/news/articles/SB30001424052702303949704579459022620002030)

China Loses Its Allure

Jan 25th 2014

ACCORDING to the late Roberto Goizueta, a former boss of The Coca-Cola Company, April 15th 1981 was “one of the most important days…in the history of the world.” That date marked the opening of the first Coke bottling plant to be built in China since the Communist revolution.

The claim was over the top, but not absurd. Mao Zedong’s disastrous policies had left the economy in tatters. The height of popular aspiration was the “four things that go round”: bicycles, sewing machines, fans and watches. The welcome that Deng Xiaoping, China’s then leader, gave to foreign firms was part of a series of changes that turned China into one of the biggest and fastest-growing markets in the world

For the past three decades, multinationals have poured in. After the financial crisis, many companies looked to China for salvation. Now it looks as though the gold rush may be over.

More pain, less gain

In some ways, China’s market is still the world’s most enticing. Although it accounts for only around 8% of private consumption in the world, it contributed more than any other country to the growth of consumption in 2011-13. Firms like GM and Apple have made fat profits there.

But for many foreign companies, things are getting harder. That is partly because growth is flagging (see article), while costs are rising. Talented young workers are getting harder to find, and pay is soaring.

China’s government has always made life difficult for firms in some sectors—it has restricted market access for foreign banks and brokerage houses and blocked internet firms, including Facebook and Twitter—but the tough treatment seems to be spreading. Hardware firms such as Cisco, IBM and Qualcomm are facing a post-Snowden backlash; GlaxoSmithKline, a drugmaker, is ensnared in a corruption probe; Apple was forced into a humiliating apology last year for offering inadequate warranties; and Starbucks has been accused by state media of price-gouging. A sweeping consumer-protection law will come into force in March, possibly providing a fresh line of attack on multinationals. And the government’s crackdown on extravagant spending by officials is hitting the foreign firms that peddle luxuries (see article).

(Read more: http://www.economist.com/news/leaders/21595001-life-getting-tougher-foreign-companies-those-want-stay-will-have-adjust-china)

High Stakes Limit Bid to Cow Putin

By Matthew Karnitschnig in Berlin, Selina Williams in London and William Mauldin in Washington

Updated March 4, 2014 11:10 p.m. ET
Threats by the U.S. and European powers to impose tough sanctions on Russia over its incursion into Ukraine have run into a difficult economic reality: The West has as much at stake as Moscow.

While sanctions were central to international efforts to exert pressure on countries such as Iran and Myanmar in recent years, Russia’s sheer size and economic entanglement with the West make it much harder to isolate.

Russian President Vladimir Putin seized the point at a news conference on Tuesday in Moscow, warning that all sides would suffer if sanctions were imposed.

“Those who are thinking of imposing the sanctions should be the ones first of all to think about their consequences,” he said. “I think in the modern world, when everything is so interconnected and everyone depends on everyone else in one way or another, it’s of course possible to do some damage to one another, but it will be mutual damage.”

President Barack Obama and other Western leaders have warned Russia of severe consequences if it doesn’t reverse course in Ukraine.

Yet Russia has become so deeply embedded into the European economy since the Soviet Union’s collapse that any move to substantially curtail its commercial and economic ties with the West would risk major economic damage to both sides across a range of sectors—from energy to transportation and finance.

(Read more:http://online.wsj.com/news/articles/SB10001424052702303630904579419462828888256)

               

             

China Demand Still Buoys Global Producers

By Patrick McGroarty in Johannesburg, Drew Hinshaw in Accra, Ghana, and Rhiannon Hoyle in Sydney

Feb. 3, 2014 7:10 p.m. ETnull

Leafy dried tobacco, stacked in a Zimbabwe auction hall, offers a glimpse of how China’s resilient global demand has spared many suppliers—even as investors flee emerging markets on fears of the Asian giant’s ebbing appetite.

Last year, Zimbabwe auctioned off one-third of its tobacco crop to its biggest customer, China, bringing in about $700 million overall to the cash-starved southern African economy. This month, the government is opening its annual tobacco auctions earlier than usual, anticipating that an even larger crop and sustained Chinese demand will earn it as much as $1 billion, said Zimbabwe’s Tobacco Industry & Marketing Board.

“When times are great people smoke more. When times are difficult people smoke more,” said Adam Molai, executive chairman of Savanna Tobacco, a Zimbabwean cigarette maker. “There are a lot of people in China to smoke more.”

From southern Africa to southern Asia, investors have soured on many commodity-rich emerging markets boosted in the past by China’s ravenous appetite for what is grown from the soil or extracted from the mines. But so far, a slowing China hasn’t hurt its suppliers much.

That is because massive Chinese demand hasn’t significantly weakened and many emerging economies now have their own consumers to help pick up any slack. The global market jitters, economists and executives say, reflect less an actual falloff in China’s appetite and more a bet that China’s growth will continue to taper off.

“People are mistaking slowing headline growth with the real impact of GDP. It’s not game over,” said Charles Robertson, chief economist for investment bank Renaissance Capital. “The Chinese growth story is still decent even if the percentage number is slower.”

As investors have fled emerging markets around the world recently—also spurted on by the U.S. Federal Reserve’s diminished bond-buying program—they have punished some vital Chinese suppliers, such as Indonesia and South Africa. Their currencies, the rupiah and the rand, have lost a quarter of their value against the U.S. dollar in the past year.

(Read more:http://online.wsj.com/news/articles/SB10001424052702303743604579354791070747568)

Spotted Again in America: Textile Jobs

By Cameron McWhirter in Atlanta And Dinny McMahon in Hangzhou, China

Updated Dec. 22, 2013 3:31 p.m. ET

Zhu Shanqing, who owns a yarn-spinning factory in Hangzhou in China’s Zhejiang province, is struggling with rising costs for labor, energy and land. So he is boxing up some of his spindles and moving.

To South Carolina.

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Mr. Zhu is one of a growing number of Asian textile manufacturers setting up production in the U.S. Southeast to save money as salaries, energy and other costs rise at home. His company, Keer Group Co., has agreed to invest $218 million to build a factory in unincorporated Lancaster County, not far from Charlotte, N.C. The new plant will pay half as much as Mr. Zhu does for electricity in China and get local government support, he says. Keer expects to create at least 500 jobs.

There is another benefit. As costs continue to increase in China, Keer can ship yarn to manufacturers in Central America, which, unlike companies in China, can send finished clothes duty-free to the U.S.

The move by Mr. Zhu and others will scarcely revive a once bustling Southern textile industry. But it illustrates how shifts in global trade are creating advantages for U.S.-based manufacturing.
(Read more:http://online.wsj.com/news/articles/SB10001424052702304202204579256120230694210)